why is there a labor shortage in manufacturing?

While recent events brought to light the issue of the labor shortage in the manufacturing sector, the lack of skilled workers has been an ongoing challenge for the industry for years. This issue often causes a ripple effect throughout the organization that can lead to longer lead times, reduced output, increased worker burnout and higher employee turnover, which only worsens the problem.

For consumers, this ongoing labor shortage can result in empty shelves, slower delivery times and higher costs. It’s likely that these labor challenges are going to persist unless organizations and governments take action to encourage more workers to the industry. To make this a reality, it’s important to start by understanding the causes of the labor shortage in manufacturing.

why is there a labor shortage in manufacturing?

There is no simple answer to explain the manufacturing labor shortage. Instead, it’s a combination of issues, many of which have been plaguing the industry for years.

Here’s a look at some potential reasons for today’s labor shortage in manufacturing:

lack of stability

According to our 2023 Randstad Workmonitor, job security is one of today’s workers' top concerns. In fact, our study shows that 92% of global workers consider job security to be important, and 63% state that they wouldn’t take a job that doesn’t offer this protection.

Unfortunately, several factors impact the stability of the manufacturing industry. First and foremost, supply chain disruptions that peaked during the pandemic are still plaguing the industry today. When manufacturers can’t secure the raw materials they need, it can result in reduced hours for the workers.

Continuous supply chain challenges also result in higher costs. According to a recent study, 71% of global organizations rank rising costs as the number one supply chain concern.

Unfortunately, global turmoil is also causing supply chain disruptions and rising costs. For instance, the Russia-Ukraine War caused a spike in fuel costs around the globe. Because Russia is a main producer of many different metals, such as copper, nickel and aluminium, the conflict led to an increase in these costs as well. Aluminum, for example, saw record-high costs at the onset of the conflict.

The Israel-Palestine conflict is also spurring supply chain challenges. For example, any disturbances in the Middle East can result in a bottleneck of cargo ships through the Suez Canal, which will slow down delivery times.

Add these factors to growing concerns about a global recession, and it’s easy to see why many organizations, including manufacturers, are looking for ways to cut costs. This can result in layoffs and reduced hours, both of which impede job security for the workers.   

low wages

The ongoing labor shortage has also sparked a candidate-driven job market. Many of today’s workers are demanding higher wages. This is not surprising. After all, salaries have long been one of the strongest motivators for changing jobs. In fact, according to our employer brand research, 62% of workers around the world rank salaries as the number one factor to join or leave a company.

This led many manufacturers to increase wages to meet this demand. According to the National Association of Manufacturers, U.S.-based manufacturers plan to increase wages by 3.5% in 2022.

While this is a great start, today’s workers are looking for more than just annual pay reviews. They want a complete compensation package that includes other monetary benefits, such as monthly cost-of-living stipends and gas subsidies.

It’s important for manufacturers to reassess their compensation packages to determine how they compare with industry standards. If necessary, your company may need to adjust its salary and benefits offerings to meet this demand.

aging workers

While the aging workforce is affecting employers across industries, the manufacturing sector is particularly impacted. Research shows that 30% of the global workforce will be aged 50 or over by 2050. This is a real concern for employers in the manufacturing sector, who are already struggling to fill open positions and acquire the right skills.

The aging workforce in manufacturing requires employers to replace these vacant roles, and they lost the skills and knowledge these experienced workers possessed.

It’s important for employers to develop mentorship or apprenticeship programs to allow their older workers to transfer their skills and knowledge to the younger generations. It’s also important to have a replacement strategy in place to help fill these open positions.

The good news for manufacturers is the fact that some older workers who retired during the pandemic are considering coming back to the workforce. Perhaps this is due to growing recession concerns, but studies show that 1 in 6 retired workers in the U.S. are strongly considering going back to work. Manufacturers may be able to entice these workers back with benefits, such as part-time work options, flexible scheduling and employee training.

higher demand for tech-related skills

Another major challenge facing the manufacturing industry is the implementation of advanced technology in the workplace. It’s true that the use of this technology, such as robotics and 3D printing, has enabled manufacturers to automate many tasks that workers used to complete manually. While this transformation to automation has eliminated millions of jobs in the manufacturing industry, it also opened the doors to a variety of new roles.

Unfortunately, these new jobs require a new skill set that many manufacturing workers simply don’t have. This factor has left businesses stuck trying to acquire these skills. This problem is so widespread that an estimated 10 million manufacturing jobs across the globe remain vacant due to the skills gap. To help combat this problem, many employers are investing in reskilling and upskilling their current workers to secure the specific skills the company needs.

what skills are in most demand?

The current labor shortage is so extensive that manufacturers are hiring for nearly every position. However, there are a few job roles that are in very high demand today, such as quality assurance specialist, industrial engineer, assembler, production manager and welder.

The skills that will be in most demand in the near future include the ability to collaborate across manufacturing disciplines and interact with customers and partners in ways that today’s workforce often does not. We’ve identified some of the most in-demand skills for the manufacturing industry.

• adaptability
• program management
• programming skills and IT management
• people skills
• critical thinking skills
• cybersecurity
• organizational

negative perception of the industry

The manufacturing industry has struggled with an image problem for years. While the vast majority of parents in the United States believe manufacturing is important, only 40% state they would encourage their children to pursue a manufacturing job. Why such a negative perception? There are a few reasons.

First, many people believe manufacturing jobs are technologically undeveloped and require hard work, long hours and low wages. While some of these beliefs may be true, manufacturing companies are failing to highlight the value of providing quality goods to consumers. Today’s workers, especially the younger generations, want to feel like their work has meaning. Manufacturers must be better at highlighting the benefits their products bring to society, as well as the dynamic and tech-driven environment of the modern production plant floor.

There’s also a misconception that career growth within the manufacturing industry is basically non-existent. If manufacturers want to attract younger generations, they must highlight their employee training and workforce development in manufacturing programs so current and prospective workers understand how they can grow with the company. For example, Schneider Electric created the Schneider Electric University to train employees at various levels within the company. The company also maintains Energy University, which is a free online platform where employees can choose from more than 200 knowledge-based courses.

lack of diversity

Lack of diversity in the workforce has plagued the manufacturing industry for decades, especially regarding gender equality. While the industry has made great strides to improve diversity in the workplace, studies show that globally women make up less than 30% of the entire manufacturing workforce.

More efforts must be made to entice women to join the industry. For example, manufacturers need to assess their job offerings and adjust their workplaces so they’re able to build a diverse workforce. 

Some organizations have been taking steps to improve the image of the manufacturing industry. For example, the National Association of Manufacturers in the United States has implemented a $14 million marketing campaign, referred to as Creators Wanted, in an attempt to strengthen diversity in the workplace and attract more prospective candidates.

side effects of COVID-19

It would be impossible to discuss today’s ongoing labor shortage without understanding the role COVID-19 plays. Workers across industries faced unprecedented challenges that severely shifted how these workers viewed their role in the workforce. While the pandemic has subsided, many of these challenges and shifts in workers' expectations remain.

mental health support

During the pandemic, workers in the manufacturing industries faced a wide range of challenges. Some faced frequent shutdowns and temporary layoffs, while others found themselves working long hours due to staffing shortages and consumer demands. At home, workers also faced unprecedented challenges, including school closings and caring for elderly loved ones. These issues are so widespread that one study showed an 86% spike in burnout among workers in the manufacturing industry during 2020.

Today, rising costs and recession concerns are causing extreme stress on families across the globe. To account for this concern, more workers are taking on second jobs. This can increase the risk of burnout. This factor makes it more important than ever for employers to provide additional mental health supportive services, including wellness checkups, online counselling services, and more liberal leave policies.

desire for flexibility

A major challenge facing the manufacturing industry is its limited ability to offer remote work options. Since the pandemic, many workers now value the importance of maintaining a healthy work-life balance. In fact, according to our 2023 Randstad Workmonitor, 45% of workers said that they wouldn’t take a job if it didn’t allow for a healthy work-life balance.

While remote work may not be possible for many manufacturers, there are still things your company can do to provide more flexibility. For example, additional paid time off may give employees the extra days they need to deal with personal issues. Using other strategies, such as shift swapping, voluntary vs. mandatory overtime, compressed schedules and part-time work options, can help to expand your talent pool and improve hiring results.

The labor shortage is a great challenge for manufacturing businesses, but understanding the causes behind it can help your company overcome it. Gain more insights into the causes behind today’s labor shortage by downloading 7 stats that help explain the global talent shortage.

This is an updated version of an article originally published on 25 May 2022.